Problem 11A.

Ques.1 ques.2 Ques.3 Problem 11A.2

Mehta Shah Profit Margin Ratio 10.19% 5.38% Profit(straight line method) 5500 11700 Profit Margin Ratio 10.19% 15.00% As we can see from the above working method of depreciation plays a very importa

20X2 Net Sales COGS GP Operating Expenses NP

20X1 %Changes 97000 85000 12.37% 52000 49000 5.77% 45000 36000 20.00% 12000 9000 25.00% 33000 27000 18.18%

Problem 11A.3 Liabilities Share Capital Reserves & Surplus Secured Loans unsecured loans CL total 20X1 20X2 20x1 13700 13700 31.86% 3500 7600 8.14% 11600 5000 26.98% 10300 29800 23.95% 3900 14900 9.07% 43000 71000 100.00% 20X4 20X3 8433 7680 7342 7060 1091 620 206 192 551 299 8834 8249 3104 3147 2959 2340

Problem 11A.4 Particulars 20X5 Sales Total operating exp. Income from operations Int. Exp. NP TA Long term Debt Equity Trend Analysis Sales Total operating exp. Income from operations Int. Exp. NP TA Long term Debt Equity

6471 5489 982 205 603 6484 2241 1955

214.09% 198.22% 464.26% 121.89% 706.41% 164.20% 116.56% 231.35%

194.97% 190.60% 263.83% 113.61% 383.33% 153.33% 118.17% 182.96%

164.28% 148.19% 417.87% 121.30% 773.08% 120.52% 84.15% 152.85%

Problem 11A.5
PROFIT MARGIN ASSET TURNOVER RETURN ON ASSETS OR RETURN ON INVESTMENTS RETURN ON EQUITY

20X6 13.95% 1.91 26.67% 50.00%

20X5 15.49% 1.87 28.95% 56.41%

Problem 11A.6
CURRENT RATIO QUICK RATIO AVERAGE DEBT COLLECTION PERIOD INVENTORY TURNOVER

20X2 1.51 0.79 26.98 6.75

20X1 1.09 0.59 23.34 7.65

preciation plays a very important role. A change in method can cause a huge difference in evaluation of two com

As compared to % increase in sales the increase in COGS is comparitive less. Operating expenses has seen increase of 25% as compare to increase in net sales of 12.37% Due to 20% increase in Operating profit the Increase in NP is low than Increae in GP

20x2 19.30% 10.70% 7.04% 41.97% 20.99% 100.00% 20X2 5137 4553 584 198 356 5954 2677 1359 20X1 3939 3704 235 169 78 5380 2663 1279

Assets 20X1 20X2 20X1 20X2 FA 21500 28400 50.00% 40.00% Investment 200 300 0.47% 0.42% Inventories 10800 21300 25.12% 30.00% Debtors 7000 16500 16.28% 23.24% Cash 3500 4500 8.14% 6.34% 43000 71000 ### ###

130.41% 122.92% 248.51% 117.16% 456.41% 110.67% 100.53% 106.25%

100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Formulas

Profit after tax/ sales * 100 Sales/average total assets Profit after tax/ average total assets * 100 Profit after tax/ average shareholder's equity * 100

Current assets/ current liabilities Quick Assets/ current liabilities Average debtors/(sales)/365 days Cost of goods sold/average inventories

e in evaluation of two companies

sales of 12.37%

Net Sales C.O.G.S. Gross Profit S & A Expenses PBIT

HORIZONTAL ANALYSIS Profit & Loss Account Change 20X2 20X1 Amt. 97300 88400 8900 68500 57600 10900 28800 5300 23500 30800 4500 26300 -2000 800 -2800

Interest Expense Profit before Tax Income Tax Profit after Tax

1800 21700 10500 11200

1400 24900 12000 12900

400 -3200 -1500 -1700

BALANCE SHEET Change 20X2 Shareholder's funds Share Capital Reserves &Surplus Liabilities Secured Loans Unsecured Laons Current Liabilities 25000 11800 36800 9000 3000 23300 72100 20X1 25000 8600 33600 8000 1000 17100 59700 Amt. 0 3200 3200 1000 2000 6200 12400

Assets Fixed Assets Investments Inventories Debtors Cash Other C.A.

32200 2800 10600 20900 4400 1200

26500 4300 4900 15600 7000 1400

5700 -1500 5700 5300 -2600 -200

72100

59700

12400

Problem 11B.2 Ques.1 a) b) c) d)

1 Profitability Ratios Profit Margin Ratio Asset Turnover Ratio

20X2

20X1

Formula

Return on Asset ROE

2 Liquidity Ratios Current Ratio Quick ratio Debtors Turnover Ratio Inventory Turnover Ratio 3 Solvency ratios Debt To Equity Ratio Liability to equity Ratio Interest Cover Ratio 4 Market Standing Ratios Price- Equity Ratio Dividend Yield Ratio Price to book Ratio

11.51% 1.48 17.00% 31.82%

14.59% Profit after tax/ sales * 1 1.76 Sales/average total asse 25.62% Profit after tax/ average to 45.83% Profit after tax/ averag

a) b) c) d)

1.59 1.14 5.33 8.84

1.69 Current assets/Current liab 1.40 Quick Assets/ current liabi 6.41 Sales / Average debtor 2.19 Cost of goods sold / Aver

a) b) c)

0.33 0.96 13.06

0.27 0.78 18.79

Secured loans + unsecu Debt + Current liab Profit before interes

a) b) c)

6.70 10.67% 3

7.60 Avg. stock price/ EPS 7.00% dividend per share/Av 4 Market value of share/ B

Problem 11B.3 Transaction Ratio a Inventory turnover b ROI c Recievable Turnover d Debt to equity e Return on assets f Quick Ratio g Profit margin h EPS i Quick Ratio j Operating profit margin k ROI

Effect No effect decrease No effect No effect decrease No effect No effect decrease increase No effect

l m n o p q r s Problem 11B.5

Debtors turnover Debt to equity Interest coverage Asset turnover ROI Return on assets Quick Ratio Profit margin Relevent Ratios Debt equity Ratio Interest Coverage Ratio liability Equity Ratio Debtors Turnover Ratio ROI

No effect increase No effect decrease increase No effect No effect Granny Foods Home Foods Remarks 0.89 0.93 Granny is better 8.85 13.96 home is better 1.90 1.76 home is better 13 13.39 home is better 45.56% 40.18% Granny is better

Comment On the basis of above relevent ratios loan should be approved to Home Food a even if their debt euity ratio is higher than Granny yet their interest coverage b they have less liability equity ratio as a result they are more secured If current assets would be given we would have checked their liquidity more Problem 11B.6 Arogya Company: P&L Net Sales COGS GP Selling and administration exp. PBIT Int. Exp. PBT Income Tax PAT Balance Sheet Shareholder's Fund Share Capital Reserves and surplus Liabilities Secured Loan unsecured Loan Current liabilities 50000 -33000 17000 -9000 8000 -1000 7000 -3500 3500

28000 12000 40000 21000 17000 22000

60000 100000

Assets Fixed Assets

69000

Investments Inventories Debtors Cash Other Current assets

2400 16500 10000 1500 600 100000

COMMON SIZE Profit & Loss Account % 10.07 18.92 -6.49 17.78 -10.65 20X2% 20X1% 100 100 42.04 7.74 34.31 53.47 7.81 45.66

Net Sales C.O.G.S. Gross Profit S & A Expenses

28.57 -12.85 -12.50 -13.18

PBIT Interest Expense Profit before Tax Income Tax Profit after Tax

2.63 31.68 15.33 16.35 0.00

2.43 43.23 20.83 22.40 0.00

Change %

BALANCE SHEET 20X2% 0.00 37.21 9.52 Shareholder's funds Share Capital Reserves &Surplus Liabilities Secured Loans Unsecured Laons Current Liabilities #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! 100.00 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! 100.00 20X1%

12.50 200.00 36.26 20.77

21.51 -34.88 116.33 33.97 -37.14 -14.29

Assets Fixed Assets Investments Inventories Debtors Cash

#DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

#DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

20.77

Other C.A.

#DIV/0! 100.00

#DIV/0! 100.00

Formula

Profit after tax/ sales * 100 Sales/average total assets Profit after tax/ average total assets * 100 Profit after tax/ average shareholder's equity * 100

Current assets/Current liabilities Quick Assets/ current liabilities Sales / Average debtors Cost of goods sold / Average inventories

Secured loans + unsecured loans/ Shareholders' equity Debt + Current liabilities/shareholders' equity Profit before interest and tax/ interest expense

Avg. stock price/ EPS dividend per share/Avg. stock Price Market value of share/ Book Value per share

Remarks Granny is better home is better home is better home is better Granny is better

approved to Home Foods et their interest coverage ratio is better re more secured

ked their liquidity more specifically.